Sony, Microsoft, Nintendo Say Trump Tariffs Will Make Game Consoles Hugely More Expensive

from the Big-Old-Derp dept

If you hadn't noticed by now, Trump's efforts to use tariffs to somehow magically improve the country's standing in the world aren't based on much in the way of sound logic or economic theory. And companies who've been forced to reconfigure and relocate their entire supply chains (to countries like Taiwan) to avoid massive penalties are likely to just pass those costs on to American consumers, something said consumers haven't really fully grokked yet. Countless CEOs think the entire gambit is immeasurably stupid, but have been hesitant to be too pointed in their criticism for fear of upsetting administration regulators.

As the actual bill comes due however, consumers are likely to wake up from their slumber. Maybe.

Case in point: Microsoft, Sony, and Nintendo this week fired off a letter to the Office of the United States Trade Representative, warning the Trump administration's plan to bump Chinese tariffs from 10 to 25 percent will have a profoundly-negative impact on the game industry. With 96 percent of game consoles made in China last year, the act of reconfiguring their entire supply chains will have a massive impact on the sector's bottom line and the numerous connecting companies that tendril out from the big three gaming giants.

The letter itself is abundantly clear that it's not these companies that are going to eat these costs, but the American consumer. In fact, the full letter (pdf) leans heavily on data suggesting that the 25 percent hike on game consoles will result in US consumers paying $840 million more on the game hardware than they might have anyway:

"A price increase of 25% will likely put a new video game console out of reach for many American families who we expect to be in the market for a console this holiday season. For those purchases that do go forward despite tariffs, consumers would pay $840 million more than they otherwise would have, according to a recent study prepared for the Consumer Technology Association by the independent economic group, Trade Partnership. That study also noted that “[e]ven after accounting for new tariff revenue, the result is a net $350 million loss for the U.S. economy for each year the tariffs remain in effect, with the burden carried by U.S. consumers."

Hey, neat.

Presumably, Trump believes that these threats will ingeniously force China's hands in trade negotiations, though it's not really clear that's actually happening. What's happening instead is a slow accumulation of collateral damage, as countless US companies (like Apple) face new penalties that will slowly chip away at the US economy before it forces China's hand. It will be curious to see what happens when American consumers realize they're the ones footing the bill as we wait for the final outcome of a unilateral US trade gambit that was never likely to actually work.

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Filed Under: china, donald trump, gaming consoles, playstation, tariffs, trade war, us, ustr, xbox
Companies: microsoft, nintendo, sony

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  1. identicon
    Anonymous Coward, 1 Jul 2019 @ 5:14pm


    Tariffs were how the Federal Government used to pay for its self. I know we are long past that point as the Government wants more and more. But being screwed over by China for YEARS and us just taking it, doesn't seem right.

    What should we do? Continue to just do nothing? How would go about to stop China from screwing us over? Go to WAR? I know some people seem to be warmongers. That was what they were calling Trump before he was elected, but now that he didn't go start something up with Iran, and is trying to bring about peace in North Koria, People are all against that. He can't win no matter what he does. It's just Orange man bad. Which sounds kind of racist.

    Tariffs are really the only option Trump has. They would disappear the minute China agreed with the terms. You know what, it has worked with Mexico!!!

    I have no problem buying less China made garbage. Because of such an unfair trade balance, this hurts China far, far more than the U.S. The longer China holds out, the more damaging it is to them. It may already be too late. Companies are now looking at other options outside of China. It won't happen overnight. It didn't happen to China overnight. But as companies look to other countries to produce their products, that has a negative effect on China. That is less money for them. MONEY is always what everything is about. As business leaves China, China loses. The U.S. will get products made for cheap in other countries. Some may move back to the U.S., but I'm sure most will just go someplace else. As their middle class grows in those countries, we'll have products they they'll want to buy from us.

    Really, I look at this as a transitional phase. The longer China holds out, the worse for them. There are places outside of China already that products could be made for the U.S. market to get around the tariffs, and for everyone else in the world, those products can continue to be made in China. I'm not really worried about it.

    Some companies will eat the cost of the tariff, and so the product won't cost you any more, but their profit margins will drop. They're hoping it won't last too, too long. Others will eat part of the costs and the rest you'll be paying. Some others, you'll just pay the full cost of the tariff. It is what it is.

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